It seems that wherever I read, whether here or on twitter, there is no shortage of opinions on where the market is headed next, myself included. But as is usually the case, you have your camp that is eyeing all-time highs and those who are looking for the floor to give out. For myself, I can’t tell where the market will close the week so I’m sure I can’t tell anyone where it will be in months or years though I have my suspicions. It has taken a long time to get a mental handle on staying flexible and trying to “go with the flow” especially when I’m afraid it’s going to reverse every other bar.
As things stand now, using my simple 5-month, 5-week, 5-day trend reader, there is a possibility that the longer-term downtrend is resuming as of Tuesday, April 5th, 2022. The long-term trend for my system is the 20wk moving average. The fact that it is trending down is a significant sign of price failing to challenge the highs over the past 5 months. The 20 DAY moving average is still trending up from the lows meaning that the 20 day trend is in mean reversion to the long-term (20wk/5-mo) trend. The 5-day moving average turned down today.
The point is that short-term trends BECOME intermediate trends which BECOME long-term trends.
I chose the 20 week moving average because it seemed to fit best to the longest trending movements that I would like to align my own trades with and is enough to stay with the majority of any bull or bear market as it occurs. As you will see below, the 20wk MA as well as the 20wk upper bollinger are both the most significant test points in bear markets (bull markets, too, but I’m staying focused on the current appearances).
First a reminder that the dots below the charts are the trend signals with the 100day/20wk MA’s in the middle. The next dots either side are the 20MA’s and the top and bottom dots are the 5MA signals. Very simply, if the moving average is trending up, a blue dot appears. If it is trending down, a red dot appears. I have highlighted the 20-week MA’s and the 5-day MA’s only. Now without further delay…
Almost all of these tests had already established larger and longer structures lasting a month or two before breaking into a fresh leg down. The current uptrend from the lows has only been going three weeks now which has me thinking that this leg down will probably not break the lows, but continue to build a price structure out in time that will make for some very recognizable and significant breakdowns when they occur.
Remember that the longer the trend line and the longer the moving average, the more established the structure becomes and the more significant the break as well.
As I’m currently using it, the 5MA’s alignment with the 20wkMA is the most important to note and I use the 20-day MA as a reference point for how the trend is developing and for adjusting risk by opening or closing trades. With price being below the 5MA my ultimate stop is an hourly close above the 5MA itself (sort of. I’m actually using a 35hr Donchian channel midline, but it tracks very closely to the 5MA).
Let’s see how this plays out! Good luck!
